Autodesk 2009 Annual Report Download - page 112

The 45% decrease in income from operations in fiscal 2009 as compared to fiscal 2008 was primarily due to
goodwill and intangibles impairment charges of $128.9 million, or 29 percentage points of the 45% decrease,
affecting the fourth quarter of fiscal 2009, principally associated with our M&E segment, and a restructuring
charge of $40.2 million, or 9 percentage points of the 45% decrease, as well as the impact of in-process research
and development expenses and intangibles amortization from our acquisition activity.
Net revenue for fiscal 2009 increased by 7% as compared to fiscal 2008 due to a 29% increase in
maintenance revenue, slightly offset by a 1% decrease in license and other revenue. Net revenue for our 3D
model-based design products increased 23%, while net revenue from our 2D products remained flat during fiscal
2009, as compared to the prior fiscal year. A critical component of our growth strategy is to continue to add new
2D horizontal users, while expanding our customers’ portfolios to include our higher value 2D vertical and 3D
model-based design products. For fiscal 2009 we experienced growth in net revenue in Europe, Middle East,
Africa (“EMEA”) and Asia Pacific (“APAC”).
We generate a significant amount of our revenue in the United States, and in countries outside the United
States such as Japan, Germany, France, the United Kingdom, Italy, the Russian Federation, Canada, South Korea,
China and Australia. We benefited from a weaker U.S. dollar relative to foreign currencies in the first three
quarters of fiscal 2009; the trend reversed in the fourth quarter of fiscal 2009 with the U.S. dollar strengthening
against most currencies. The weaker value of the U.S. dollar relative to foreign currencies for the majority of
fiscal 2009 had a positive effect of $56 million on operating income in fiscal 2009 compared to fiscal 2008. Had
exchange rates from fiscal 2008 been in effect during fiscal 2009 (“on a constant currency basis”), translated
international revenue billed in local currencies would have been $79 million lower and operating expenses would
have been $23 million lower. This represents a 4% increase in net revenue and a 2% decrease in income from
operations on a constant currency basis during fiscal 2009 as compared to fiscal 2008. Changes in the value of
the U.S. dollar may have a significant effect on net revenue and income from operations in future periods. We
use foreign currency forward and option collar contracts to reduce the exchange rate effect on the net revenue of
certain anticipated transactions.
Our total operating margin decreased from 21% of net revenue in fiscal 2008 to 11% in fiscal 2009. This
decrease is primarily due to the goodwill and intangibles impairment charge and the restructuring charge
discussed above. These decreases were partially offset by a net revenue increase of 7%.
Even in these challenging economic times, we will continue to invest in growth and productivity initiatives
so that we will be better positioned for growth when the economy improves. Over the longer term we intend to
continue to balance investments in revenue growth opportunities with our goal of increasing our operating
margins. Our operating margins are very sensitive to changes in revenue, given the relatively fixed nature of
most of our expenses, which consist primarily of employee-related expenditures, facilities costs, and depreciation
and amortization expense. For fiscal 2010, we expect total costs and expenses to decrease in absolute dollars as
we continue to work on finding ways to align our cost structure with our current financial condition, and increase
as a percentage of net revenue during fiscal 2010, as compared to fiscal 2009. However, there can be no
assurance that our cost structure will not increase in the future or that we will be able to align our cost structure
with our expected actual financial results. In addition, in taking these actions, we may incur additional costs
which could negatively impact our net income and cash flows from operating activities. For the first quarter of
fiscal 2010, we expect that our net income will be negative.
Net cash flows provided by operating activities of $593.9 million for fiscal 2009 was primarily comprised of
net income and the net effect of non-cash expenses associated with stock-based compensation, the impairment of
goodwill and intangibles, primarily related to our M&E segment, as well as restructuring charges. We expect net
cash flows provided by operating activities to be negative in the first quarter of fiscal 2010 as a result of lower
revenue combined with cash expenditures in the quarter for payments of the annual employee incentive plan and
payments related to our restructuring plan.
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